EMV Transition in the US is a Disaster

It started about a year ago in the United States. The transition of millions of credit cards from standard swipe cards with a magnetic strip to a more sophisticated card with an embedded chip inside. The new credit cards were supposed to make everyday transactions safer and more secure, but the story that you may hot have heard is it just isn’t working as expected.

Retailers spent a lot of money to meet the mandated transition of the hardware and infrastructure to support the new technology sent out by the major banks, but customers find it confusing, time consuming, and difficult to figure out when and where it will work correctly.

This problem seems to be driven by an inconsistent implementation at the retailers. Some retailers have installed the new software and are unable to support the new technology, resulting in an post-it notes asking you to just swipe your old magnetic strip and most card reading slots being taped over to block the chip readers from even being used.

In this article by Ian Kar, we learn some of the facts about this less than successful rollout:

All of this started when the US decided to move to the chip standard—known in the industry as EMV. The US process was different from those of other countries, where governments instituted a mandate to upgrade everything by a certain date.

The US implemented something called a “liability shift”—essentially, if retailers didn’t support chip card payments by buying a new, expensive machine, they’d be held accountable for any sort of fraud that occurred in their store. Usually, that’s the bank’s responsibility. So, as long as retailers purchased the new chip-card reading terminals, liability would shift back to the bank. In a July report on the chip card transition in the US, the Aite Group, a financial services research firm, cited a lack of mandate in the US as one reason the chip card transition has been so confusing.

The liability shift date in the US was Oct. 1, 2015. But, when the date rolled around, shoppers were hard pressed to find a chain retailer that actually supported chip cards, let alone a mom-and-pop shop. In a letter from industry trade group Food Marketing Institute asking credit card companies to postpone the liability shift, the group wrote that as of April 2015 retailers were experiencing four-month delays just waiting for their new terminals to arrive.

And just because shops finally got new terminals didn’t mean they’d immediately start accepting chip cards. Their payment processors needed to certify their systems were still compliant and working correctly before the chip readers could be turned on. Even in 2016, they can only do that by physical inspection. That process can drag out for weeks, and some bigger retailers were still verifying their terminals as of early 2016, according to sources that spoke to Quartz.